Bangladesh must accelerate structural reforms, strengthen private sector investment and improve policy predictability to sustain economic growth and enhance competitiveness ahead of its graduation from Least Developed Country (LDC) status, speakers said at a business dialogue organized by the American Chamber of Commerce in Bangladesh (AmCham) at The Westin Dhaka on July 28, 2026.
The event, titled “Economic Outlook and Finance Act 2026: Key Changes and Implications,” brought together business leaders, policymakers, economists, tax experts and corporate executives to discuss the country’s macroeconomic outlook and the implications of the newly enacted Finance Act 2026.
The dialogue featured a keynote presentation by Dr. Fahmida Khatun, Executive Director of the Centre for Policy Dialogue (CPD), while Shams Zaman, Country Managing Partner of PwC Bangladesh, presented the key corporate tax reforms introduced under the Finance Act 2026.
The discussions concluded that while Bangladesh continues to demonstrate economic resilience amid global uncertainties, sustainable growth will depend on restoring investment confidence, improving the ease of doing business and implementing fiscal reforms effectively.
Private Investment Must Lead the Next Phase of Growth
Presenting Bangladesh’s economic outlook, Dr. Fahmida Khatun emphasized that private investment remains the most important driver of employment generation, industrial productivity and long-term economic expansion.
While public investment continues to play a significant role in infrastructure development, she observed that sustainable economic growth cannot be achieved without stronger private sector participation.
Also Read : ESG, Transparency and the Future of Bangladesh’s Garment Industry
According to her, Bangladesh currently faces several structural challenges that continue to discourage investment, including persistent inflation, high financing costs, weak private sector credit growth, energy supply uncertainty, infrastructure constraints, policy inconsistency and shortages of skilled human resources.
She noted that private sector credit growth has remained relatively weak, reflecting subdued business confidence and slower investment activity. Without stronger private investment, achieving higher GDP growth and creating quality employment opportunities will become increasingly difficult.
Inflation Remains a Key Challenge
Inflation continues to be one of Bangladesh’s most pressing macroeconomic concerns. Although the government has targeted inflation at around 7.5% for the current fiscal year, the 12-month average inflation up to May remained significantly higher at approximately 8.68%, placing additional pressure on businesses and consumers alike.
Dr. Khatun observed that policymakers face a delicate balancing act. While tighter monetary policy and higher interest rates are necessary to contain inflation, elevated borrowing costs also discourage business investment.
She stressed that improving productivity, reducing inefficiencies in public expenditure and implementing coordinated fiscal and monetary policies will be essential to achieve both inflation control and sustainable investment growth.
Revenue Mobilization and LDC Graduation
The CPD Executive Director also highlighted Bangladesh’s long-standing revenue mobilization challenges. She pointed out that actual tax collection has consistently fallen short of ambitious revenue targets, while the country’s tax structure remains heavily dependent on indirect taxation such as VAT and trade-related taxes.
As Bangladesh prepares for LDC graduation, the country will gradually lose preferential trade benefits enjoyed in major export markets. To remain competitive, she said Bangladesh must broaden its tax base, increase direct tax collection, improve compliance, strengthen tax administration and reduce reliance on indirect taxation.
She also emphasized the importance of improving export competitiveness through diversification, technological upgrading and productivity enhancement, while maintaining macroeconomic stability.
Business Priorities: Energy, Finance and Predictable Policies
During the discussion, speakers identified three critical priorities for the business community. Reliable and uninterrupted energy supply remains essential for manufacturing industries, particularly Bangladesh’s textile and apparel sector, where production disruptions directly affect export competitiveness.
Businesses also require access to affordable financing. High lending rates continue to constrain investment, especially for small and medium-sized enterprises (SMEs), which face greater difficulties in accessing capital.
Equally important is policy predictability. Stable tax policies, transparent regulations and consistent implementation of reforms are considered essential for attracting both domestic and foreign investment.
Finance Act 2026 Signals a More Predictable Tax Environment
Presenting the Finance Act 2026, Shams Zaman said the legislation represents more than a collection of tax amendments. Rather, it reflects a broader policy direction aimed at creating a stable, transparent and investment-friendly tax regime.
PwC explained that the Finance Act has been built around four strategic pillars—Stability, Reform, Inclusive Prosperity, and Compliance & Administration.
Under the Stability pillar, the Act introduces five-year corporate tax certainty, legal recognition of digital record-keeping, multi-year tax incentives, time limitations for withholding tax (WHT) verification and clearer legal definitions.
The Reform pillar includes removal of minimum tax in certain cases, reduction of tax pre-deposit requirements for appeals, rationalisation of expense disallowance provisions and improvements to development agreement taxation.
Under Inclusive Prosperity, the government has introduced incentives for startups, reduced selected withholding tax rates and incorporated provisions relating to Digital Permanent Establishment (Digital PE) to address taxation of digital businesses.
The Compliance and Administration pillar focuses on improving alternative dispute resolution (ADR), tax refund and rebate mechanisms, assessment timelines and computation certification, while expanding digital compliance systems.
According to PwC, these measures are intended to improve certainty, reduce compliance costs and strengthen investor confidence.
Also Read : Bangladesh RMG Exports Edge Down 0.63% to $19.34bn in H1 2026
Five-Year Corporate Tax Certainty
Among the most significant reforms is the government’s commitment to maintaining corporate tax rates for five years.
PwC noted that predictable tax policy enables businesses to undertake long-term investment planning, prepare financial models with greater confidence and make more informed expansion decisions.
Although Bangladesh’s standard corporate tax rate remains 27.5%, higher than several competing investment destinations, the certainty of maintaining the rate over a five-year period is expected to improve Bangladesh’s attractiveness for investors.
During the presentation, PwC compared Bangladesh’s corporate tax rate with selected Asian economies. Thailand and Vietnam maintain corporate tax rates of 20%, Singapore 17%, Malaysia 24%, India 25.17%, Nepal 25%, while Pakistan’s corporate tax rate stands at 29%.
The comparison highlighted that while Bangladesh is not the highest-tax jurisdiction in the region, maintaining a competitive investment environment will require continued tax reforms alongside improvements in infrastructure, governance and ease of doing business.
Reduced Tax Burden and Better Compliance
PwC also highlighted important changes relating to minimum tax and expense disallowance. The reforms ensure that minimum tax no longer functions as a permanent tax burden for businesses, allowing companies to utilize tax credits against future liabilities and improving cash flow management.
Amendments to expense disallowance provisions under Section 55 are also expected to reduce the effective tax burden. Using an illustrative example, PwC demonstrated that the effective tax rate could decline from 49% to 40%, while overall tax liability would fall from 74 to 60, eliminating additional tax burdens created by certain expense disallowance rules.
The Finance Act further expands digital record-keeping, online filing, automated tax administration and risk-based assessment systems, which are expected to simplify compliance and improve administrative efficiency.
Implications for the Textile and Apparel Industry
For Bangladesh’s export-oriented textile and apparel sector, the reforms could provide greater certainty for long-term investment decisions. Five-year tax stability is expected to support capacity expansion, factory modernization, automation, sustainability initiatives and green manufacturing investments.
Improved tax refund mechanisms and minimum tax reforms may also strengthen exporters’ cash flow, while digital compliance measures could simplify interactions with tax authorities.
However, speakers agreed that fiscal reforms alone will not be sufficient to enhance Bangladesh’s competitiveness. Reliable energy supply, affordable financing, skilled human resources, infrastructure development, efficient logistics and consistent policy implementation remain equally important for attracting investment and strengthening Bangladesh’s position in global supply chains.
Looking Ahead
The dialogue concluded that Finance Act 2026 marks an important step toward building a more predictable and business-friendly fiscal framework. By emphasizing stability, reform, administrative efficiency and inclusive growth, the government has signaled its intention to improve Bangladesh’s investment climate.
However, participants stressed that the success of these reforms will ultimately depend on effective implementation and complementary structural reforms. As Bangladesh approaches LDC graduation and competes with regional manufacturing hubs such as Vietnam, India, Thailand and Indonesia, sustained improvements in productivity, governance, infrastructure and policy consistency will be essential to translate fiscal reforms into stronger investment, higher competitiveness and long-term economic growth.